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Could you please answer this question in details and clear writing? Thanks to process frozen fruit jui Although t the 5. American Fruit Co. is
Could you please answer this question in details and clear writing? Thanks
to process frozen fruit jui Although t the 5. American Fruit Co. is considering constructing a new plant uld be capital intensive, the other much more labor intensive. sion would hinge on the relative cost of capital versus labor in On e plant wo 5.6 Summary and Conclusions 1 California area, management is curious about the behavior of the plants' return on assets during a typical business cycle. a. Given the following information, calculate the break-even point in units of production for the two plants. b. The economics department has prepared sales projections for three business scenarios: recession, normal, and recovery. Sales under each scenario are expected to be as follows: recession, 300,000 units; normal, 500,000 units; and recovery, 800,000 units. Calculate the return on assets for the two plants under these three scenarios. c. If the three sce narios are all equally likely, what will be the variance of the return on assets for plant 1? For plant 2? What would you advise American Fruit? Plant 1 Plant 2 Fixed cost Variable cost (per unit) Price (per unit) Investment $200,000 1.50 2.00 1,000,000 $600,000 .50 2.00 1,000,000Step by Step Solution
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